Cross-border food and beverage deal activity rises

New analysis from leading business and financial adviser Grant Thornton UK LLP, shows that cross-border deal activity (both inbound and outbound) in the food and beverage sector continues to increase.

In Q1 2019 there were a total of 26 cross-border deals announced involving a UK/ Irish acquirer and/or target, representing over half (55%) of the 47 deals completed in the quarter. By comparison, 44% of the total deals completed in 2018 were cross-border. Forty per cent of the buyers of UK/Irish targets were of an overseas origin in Q1 2019; this compares to 27.8% overall in 2018.

Correspondingly, domestic deal activity has dipped this quarter compared to last year, with 21 deals on home territory, representing 45% of the total. In 2018, domestic deals accounted for 56% of 209 transactions throughout the year.

The total of 47 deals announced in Q1 2019 represents a fall of 19% compared to the preceding quarter’s deal volume (58 deals in Q4 2018) and compares with 43 total deals announced in Q1 2018. Total disclosed deal value for Q1 2019 resides at £1,672 million (across 14 deals), which was strongly boosted by the £975 million takeover of Dairy Crest by Saputo Inc. of Canada.

Despite the downward trend in this quarter’s deal volume compared to the preceding quarter, these figures appear to be consistent with the trend for M&A deal volume to be subdued in the first quarter of the year.

Trefor Griffith, partner and head of food and beverage at Grant Thornton UK LLP, said:

“When we released the findings of our sector deal analysis at the end of 2018 our view was that overall appetite and rationale to undertake M&A in the F&B sector remained strong, with Brexit acting as a catalyst for heightened cross border activity. The data from Q1 this year continues to support this.

“However, whilst the immediate threat of a no-deal Brexit has been postponed, food and drink businesses continue to operate in a highly uncertain environment. We have seen several potential overseas buyers pull out of sales processes to acquire UK assets, citing Brexit as the reason. Anecdotally, we have seen a significant increase in the number of business owners seeking partial exits or cash out deals. This is reflective of the ongoing Brexit uncertainty, but more so of the increasingly volatile political environment, which could have impact on capital gains tax as well as the general business environment.

“Despite the significant pressures on the industry, companies are continuing to innovate and develop new products and routes to market. Hopefully, when there is more clarity and less volatility in the market, operators will be able to thrive in a less constrained environment and we will see a more significant upturn in M&A activity.”